A Vast ISP Market, Just out of Reach

Share

A Vast ISP Market, Just out of Reach

Hong Kong ISPs face stiff local competition in a saturated market — there are around 80 companies serving an estimated 275,000 users. But with Tuesday's transition approaching, some ISP executives are betting that the China market may be their salvation because they can offer Chinese-language content.

That is, if they can wait the five years they expect it to take for China's Ministry of Posts and Telecommunications to loosen regulations.

"You have to have good relations, and wait for China to open its market," said Daniel Ng, president of Hong Kong Star Internet, which offers Chinese-language content. "Providing a good Web site with Chinese content doesn't really give you the synergy to enter the China market at the moment."

China's telecommunications industry remains largely closed to foreign companies, including those from Hong Kong. In the ISP business, four official Chinese gateway providers — Chinanet, Casnet, Cernet, and GBnet — reign supreme. Besides the trade obstacles, other structural barriers to the Internet-access business in China include expensive telecommunications charges and poor infrastructure.

Although the China card seems buried in the deck right now, the wait for it to surface might be worthwhile for Hong Kong ISPs. Growth of China's Net population — currently estimated at 250,0000 — is forecast to be more than 100 percent annually over the next several years. That means 2 million users in 2000.

Many Hong Kong ISPs hungry for the business are not content to wait.

Hong Kong Star Internet last month set up a subsidiary to explore business potential in China. And China Internet Corp., which is partly owned by China's official Xinhua News Agency, recently joined with PointCast to bolster CIC's Chinese online business-information system, called the China Wide Web.

While no one seems to have found a winning formula for selling content, some ISP executives here believe local information will be their comparative advantage when China does loosen up.

"Hong Kong's mother tongue is Chinese, and an ISP would not be able to attract the market if it did not have the right local content," said William Lo, managing director of Hongkong Telecom IMS. Last year Lo set up a special unit of 25 people to boost the depth and breadth of his company's Netvigator service.

"Similarly, the ones who have good local content and are successful here will have the best chance to go into the Chinese market," said Lo. Others echoed his comment.

"If the market is open, we are in a better position to compete, because we have already developed the Chinese content," said Hong Kong Star Internet's Ng. "In fact, we are targeting all Chinese around the world."

Most Hong Kong observers dismiss the notion of Chinese ISPs offering competition to established city services.

"There is no fear that Chinese ISPs might compete with those in Hong Kong. Mainland-based ISPs have a lack of ability in terms of good service provision and customer support, and their level of technical know-how is quite low in China," said Simon Barker, an analyst who is chairman of the New Century Group. "They have to grow in China first."